Nvidia Is Up Just 11% This Year. Here Is What History Says Happens Next.

Nvidia (NASDAQ: NVDA) stock is actually beating the Nasdaq and the S&P 500, up about 11% year to date as of July 22.

For most stocks, that's not bad at all, and most investors would take that.

But Nvidia is not like most stocks. It is the largest company in the world by market cap and is the leader and the face of the AI revolution.

Over the last three years, it averaged a 67% annualized return, and over the previous five years, it has an average annualized return of 60%.

The last three calendar years -- from 2023 through 2025 -- it returned 38%, 170%, and 240%, respectively.

So, while it's beating the benchmarks, the return has fallen short of recent years, despite ridiculously strong revenue and earnings growth numbers and a current quarter outlook that calls for revenue to increase 11% sequentially to $91 billion.

Image source: Getty Images.

Nvidia is trading at a near-historic low valuation

With a 90% market share in its core business of making graphics processing units (GPUs) for data centers, AI accelerators, and other applications, Nvidia is a staple in many portfolios.

But right now, this is a particularly good time to either add shares or take a new position in Nvidia. Here's why.

One, the stock's valuation is as cheap as it's been in at least the past five years. It is currently trading at 31 times earnings and 23 times forward earnings. At no time within the last five years has Nvidia's P/E ratio been as low as it's been in recent weeks.

The P/E ratio is roughly 41% below its 10-year average of 53.

And its five-year PEG ratio, which gauges the stock price in relation to its long-term earnings growth expectations, is actually in value territory. A PEG ratio below 1 means a stock is undervalued, and currently, Nvidia's is at a historic low of 0.56.

The last time Nvidia's P/E ratio was even remotely close to 31 was in April 2025 after the tariffs were announced. After that, the stock price rose from a low of $94 per share on April 4, 2025, to finish the year at $186 per share -- a gain of 99%.

A history of gains leading up to earnings reports

History also says that Nvidia's shares tend to rise leading up to its earnings report, as investors anticipate more blowout results. Over the past five quarters, starting with Q1 2025, which Nvidia reported on May 28, 2025, Nvidia stock has risen in the month before earnings were reported.

Some gains were smaller, like the 3% gain to $182 per share leading up to the fiscal Q2 report on Aug. 27, 2025. But some jumps were huge, like the 24% gain to $134 per share one month leading up to the Q1 report on May 28, 2025.

I'm not saying Nvidia stock will jump 24% between now and Nvidia's Aug. 26 fiscal Q2 earnings report, but there is a parallel with that 24% jump leading up to Q1 2025. At that point, Nvidia stock was trading at multiple that is similar to its current multiple.

Bottom line: This is a great time to consider Nvidia stock.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.